INTRODUCTION

A defendant in a civil suit is entitled to seek a stay of proceedings pending reference to arbitration under Section 10(1) of the Arbitration Act 2005 (Act 646), where the plaintiff has agreed to arbitrate but nevertheless commences civil proceedings in Court.

However, the stay application must be made before the defendant files any pleadings or takes “any other steps in the proceedings”.

In the recent case of Universiti Malaya v Esa Jurutera Perunding Sdn Bhd [2026] MLJU 2093; [2026] CLJU 1626, the Federal Court clarified that a request for extension of time to file a Defence, and the service of a Notice to Produce Documents Referred to in the Pleadings, do not amount to “steps in the proceedings” under Section 10(1) of the Arbitration Act 2005.

BACKGROUND FACTS

Universiti Malaya (“Plaintiff”) appointed Esa Jurutera Perunding Sdn Bhd (“Defendant”) as the civil and structural engineering consultant for a construction project.

The agreement dated 3.6.2008 entered between the parties contained an arbitration clause.

On 6.10.2022, the Plaintiff filed a Writ and Statement of Claim against the Defendant in the Kuala Lumpur High Court, claiming that the Defendant failed to fulfil its obligations under the agreement.

The Defendant entered appearance on 17.10.2022. The Defendant then requested for extensions of time on 28.10.2022 and 14.11.2022 to file its Defence, with the second extension being until 1.12.2022.

On 24.11.2022, the Defendant issued and served a Notice to Produce Documents Referred to in the Pleadings pursuant to Order 24 Rule 10 of the Rules of Court 2012.

On 1.12.2022, the Defendant issued a Notice of Arbitration pursuant to the arbitration clause.

On 2.12.2022, the Defendant filed a stay application pursuant to Section 10 of the Arbitration Act 2005. On 21.2.2023, the High Court dismissed the stay application on the basis that the Defendant had taken steps in the proceedings.

The Defendant appealed against the decision of the High Court. On 1.3.2024, the Court of Appeal allowed the appeal and set aside the decision of the High Court.

The Plaintiff was subsequently granted leave to appeal to the Federal Court.

ISSUES BEFORE THE FEDERAL COURT

The pivotal question before the Federal Court was whether: –

• i) a request for extension of time to file a Defence; and/or
• ii) the service of a Notice to Produce Documents Referred to in the Pleadings pursuant to Order 24 Rule 10 of the Rules of Court 2012,

amounted to “steps in the proceedings” under Section 10(1) of the Arbitration Act 2005.

DECISION OF THE FEDERAL COURT

The Federal Court dismissed the Plaintiff’s appeal and affirmed the decision of the Court of Appeal.

The Federal Court considered the entirety of the chronology of events and the factual circumstances of the appeal.

The Federal Court held that the Defendant’s requests for extension of time to file its Defence and the service of the Notice to Produce Documents Referred to in the Pleadings could not objectively be construed as “any other steps in the proceedings” within the meaning of Section 10(1) of the Arbitration Act 2005.

The Federal Court further held that these acts did not constitute a waiver of the agreement to arbitrate.

The Federal Court emphasised that Section 10 of the Arbitration Act 2005 should be construed so that there is minimum intervention by the Court pertaining to the parties’ agreement to arbitrate.

Even if the intention is not entirely clear, if the conduct falls short of taking the plunge in the proceedings and remains confined to the preliminaries and things peripheral to the actual prosecution or defence of the proceedings, the Court should give every encouragement to the parties to abide by the arbitration agreement entered into as the way of resolving the disputes.

Extension of Time to File Defence

The Federal Court held that not all requests for an extension of time amount to a step in the proceedings.

The Federal Court clarified that the observations in Sanwell Corp v Trans Resources Corp Sdn Bhd [2002] 2 MLJ 625 in relation to a request for extension of time to file a Defence were obiter dicta.

The Federal Court explained that a blanket proposition that a request for an extension of time constitutes a step in the proceedings, distracts attention from the true inquiry, which calls for a holistic assessment of the circumstances of the request, including the party from whom it is sought and the manner in which it is pursued.

The Defendant in this case required more time as the events and documents dated as far back as 2008, and some documents were not in its possession. The reasons given by the Defendant for the extensions of time were reasonable, and the requests were necessary and made in good faith.

The Federal Court accepted that the Defendant, through the Notice to Produce and the request for extension of time, was ascertaining the nature of the agreement between the parties, including the arbitration clause.

Unequivocal intention ought not to be determined by mere assumptions or implication but must be arrived at objectively by reference to the evidence.

Accordingly, the Defendant’s requests for extensions of time to file its Defence, as well as a mere indication in correspondence of an intention to file a Defence, did not evince an unequivocal intention to proceed with the suit and did not amount to steps in the proceedings.

Notice to Produce Documents

The Federal Court held that the service of a Notice to Produce Documents Referred to in the Pleadings did not indicate an intention to waive arbitration rights.

The Federal Court held that a necessary but peripheral application or action that does not touch on the merits of the substantive dispute does not constitute a step in the proceedings.

The Notice to Produce Documents is not a pleading. The nature of a Notice to Produce Documents is to enable the inspection of documents referred to in the pleadings.

It is peripheral to the substantive dispute between the parties and does not advance the merits of the case in any manner.

Some documents referred to in the Statement of Claim were not in the Defendant’s possession. Therefore, the Notice to Produce Documents issued by the Defendant was reasonable, necessary, and was issued in good faith.

Reservation of Rights

Reservation of rights remains relevant in determining whether there has been an unequivocal intention to proceed with the suit and to abandon the right to have the dispute disposed of by arbitration. However, an unequivocal intention cannot be established solely from the presence or absence of an express reservation of rights.

The Federal Court held that a finding of unequivocal intention must be derived from a holistic assessment of the defendant’s conduct, and the factual matrix of the matter must be viewed as a whole.

Therefore, an express reservation of rights, while relevant, must not deflect from the defendant’s overall conduct in the circumstances of the case.

CONCLUSION

A defendant does not lose the right to arbitrate merely because it takes reasonable and necessary steps to understand the claim against it.

Not every procedural act before a stay application will amount to a step in the proceedings. The Court will examine the nature of the act and whether it engages the merits of the dispute.

Parties should still reserve their rights expressly. However, the true consideration is whether the facts and the defendant’s conduct, viewed objectively and as a whole, show an unequivocal intention to proceed with the Court action and to abandon the right to have the dispute disposed of by arbitration.

This decision reinforces the pro-arbitration approach under the Arbitration Act 2005. Where there is a valid arbitration agreement which is not null and void, inoperative or incapable of being performed, the Court should give effect to the parties’ bargain unless there is clear conduct amounting to a step in the proceedings.

Disclaimer: This article is for general information only and does not constitute legal advice or legal opinion. It should not be relied upon as a substitute for specific legal advice. No person should act (or refrain from acting) based on this article without obtaining advice on the specific facts and circumstances. Halim Hong & Quek does not accept responsibility or liability for any loss or damage arising from reliance on this article. Halim Hong & Quek reserves the right to update, amend or withdraw this article at any time. All rights reserved.

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About the authors

Chew Jin Heng
Senior Associate
Dispute Resolution
Halim Hong & Quek
jhchew@hhq.com.my